The Home Sale Is Pending. What Could Possibly Go Wrong?

If you’re shopping for a new home, you notice when this signage pops up: Sale pending. It’s a firm signal that a buyer has dibs on the home. “We’re almost there!” it shouts for the world to hear.

Almost there, but some loose ends still must be tied. Home sellers might ask: What could scuttle my pending sale? Buyers might wonder: Could my purchase offer fall through, once it’s pending? Home browsers could be asking: Can I make an offer on a pending home?  

Let’s look at what happens in the pending phase of a sale.

The Many Question Marks in a Pending Sale

The parties have signed an agreement. They’ve worked diligently, taking care of all they’ve promised in that agreement. Then the seller and buyer both stand by until closing day. Both hope that their purchase agreement will go through.

Often, a contract is contingent upon the buyer selling their current home so that they can pay for their next home. If the buyer runs into a holdup with their own sale, this could block the path to closing.

What else could happen?

• The lender might withdraw the mortgage at any time up to closing day, for various reasons. Say the buyer goes shopping for a new car during the final phase of the deal. Any major purchase could throw the lender’s financial calculations out of whack by raising the applicant’s debt-to-income (DTI) ratio. A buyer’s changed credit profile can tank a loan approval at the eleventh hour.

• Someone with an unexpected title claim could show up. Or a lien could be placed against the seller’s title, preventing a transfer at the last minute. An unexpected lawsuit against one of the parties, especially one involving the state of the property itself, can also prevent a final loan approval.

• A buyer could sour on the deal, and find a reason to back out. Sometimes, the final walkthrough shows that the seller didn’t take adequate care of an issue found in the home inspection. Any home has problems — whether lived-in, or new construction. Sometimes, material defects have not been addressed. If so, the contract may say that the buyer can withdraw the agreement and take their earnest money back. That leaves the buyer free to look for another home.

• Now and then a buyer, having a change of heart or facing a fundamental change in circumstances, gives up and backs out before closing. What kind of circumstances? Imagine a lenders doing last-minute employment checks and finding out that the mortgage borrower is getting laid off or reassigned at work. For obvious reasons, this can derail the mortgage loan.

• The appraisal report could come in lower than expected, disappointing both the buyer and the seller. No one wants to learn that the home’s value falls short of the price the seller wants. The buyer’s mortgage company could cancel closing — because the figures used to issue an approval were off the mark. (Note: This rarely happens. Appraisals usually track the agreed-upon price. But when it does happen, an agent’s negotiation skills might help save a deal.)

Now and then, a hazard to health and safety becomes obvious late in the process. Natural or human-caused disasters can also strike before closing. If so, a buyer could withdraw their agreement.

Could the buyer recover their earnest money after cancellation? Maybe. It depends what occurred, and what the contract allows in the situation at issue.

How a Runner-Up Might Win the Race  

After the seller and buyer strike a deal, a lot more work must go on. Much of it, as we’ve seen, involves keeping the lender confident about its collateral — the home property. The buyer gets an appraiser and an inspector to make their professional assessments. The mortgage company reviews the reports and prepares the final loan approval. 

The finish line is at the closing table. Leading up to that final day, the sale is on hold: pending. Sometimes, a home goes from a pending purchase back into an active listing.

Then, the runner-up could overtake the one with the pending contract. So, if you’re looking to buy, it doesn’t hurt to ask your agent to let the seller’s agent know about your interest in a pending home. Be sure the seller knows there is a runner-up. Offers are often contingent on the parties completing certain actions. Sometimes those contingencies aren’t met. Then the sale can fall through. Your agent may well be able to get the scoop on the status of the contract.  

In a tough market, a motivated buyer might work with their agent to create a backup offer. That’s a signed and binding agreement. If the seller’s side will accept a backup offer, the seller agrees to deal with the backup buyer as soon as it’s known that the pending sale will not go to the closing table. This arrangement means the seller can keep things moving without having to put the home back on the market.

It Ain’t Over Till It’s Over

When a homeowner strikes a deal with a buyer, that means a deed transfer is expected. Yet no deal is final before an actual closing. In fact, the contract signed by the parties lays out a timeline so the home’s marketability and value can be fully assessed, and financing can be completed.

Once the sale gets to the “pending” stage, is the home off the market? Usually, yes. But Before closing day, surprises occasionally happen. If the surprise is a big one, well… You get the picture.

Usually, with some negotiation and a lot of work, the deal gets done. Sellers: that’s good news for you. Of all pending home sales, 95% make it to the closing table. Usually, the time it takes for the deed to change hands is a few weeks.

On the other hand, 5% of pending sales don’t succeed. If the parties’ pending closing date doesn’t come together, the seller will be looking at whoever is waiting in the wings. Buyers: If you and your agent are prepared to move quickly, you could snatch victory from the jaws of a pending sale.

Note: This article is meant as general information. Articles on this site cannot substitute for personally hiring a real estate professional to represent you in a transaction.